Capitalism and the Dutch East India Company: Crash Course World History 229

Posted By on August 25, 2019


Hi, I’m John Green, this is Crash Course World
History, and today we’re going to talk about our old friend trade and also corporations. Oh great, another Marxist rant from my union-loving
public school teacher about how capitalism is destroying the world. You know, Me from the Past, all the capitalists
call me Marxist, all the Marxists call me capitalist, I–I can’t win! Here’s the thing, Me from the Past, I am grateful
that there is a market for people to, you know, sell books and make YouTube videos,
and capitalism does a pretty good job of making goods and services available to large groups
of people. Plus how else am I going to turn sweat of
the proletariat into delicious Diet Dr. Pepper? (Not a sponsor. I wish they were a sponsor.) I’ll tell you what, Me from the Past, I’ve
enjoyed a cup or two of the sweat of the proletariat over the years and it just doesn’t have that
carbonated “pop” of Diet Dr. Pepper. What were we talking about? Oh right, capitalism.
I like capitalism, what I don’t like are monopolies and violence, and those are both aspects of
one of the first capitalist enterprises and the subject of today’s episode, the Vereenigde
Oostindische Compagnie (and I will remind you that mispronouncing things is my thing). In English of course that’s the Dutch East
India Company. I’d like to use the Dutch, though, but I can’t pronounce it, so we’re
just gonna compromise and call it the VOC. So you probably remember from our first series
that trade in the Indian Ocean had gone along swimmingly for hundreds of years until the
Portuguese tried and failed to dominate it in the 15th and 16th centuries. And you may also remember that in between
the Portuguese and the massively powerful British Empire there was another European
power: the Dutch. At the time, the Netherlands was a country
of 1.5 million people, about as many people as currently live in Greater Indianapolis.
Now, admittedly, they’d already accomplished some impressive things, for instance, they’d
dug most of their country out from the ocean, but how they came to thoroughly dominate world
trade for fifty years tells us a lot about capitalism, technology, and also, violence. I suppose we could start with the revolt of
the United Provinces in the union of Utrecht in 1579, which created the Netherlands, or
perhaps the decision by the Catholic Duke of Parma in 1585 to let Protestants leave
captured Antwerp and set up shop in Amsterdam, or we could start in 1595 with the creation
of the first Amsterdam-based investment syndicate, The Company for Far Lands, which is what I
call my Minecraft server. So the founder of The Company for Far Lands
published this report called the Itinerario that excited dreams of vast wealth and spices
from South-east Asia. There’s a key passage in the report that explains the riches available
in the islands east of Malacca: “In this place of Sunda there is much pepper,
and it is better than that of India or Malabar, whereof there is so great quantity that they
could lade yearly from thence 500,000 pounds. It hath likewise much frankincense, camphor,
and diamonds, to which men might very well traffic without much impeachment, for that
the Portugals come not thither, because great numbers of Java come themselves unto Malacca
to sell their wares.” You’ll note there that the initial idea was
to break into this already existing trade system and displace the Portugals. So in the
same way that trade in the western Indian Ocean was flourishing before the arrival of
the Europeans, the South China Sea region and eastern Indian Ocean was a trade hot-bed,
perhaps even more valuable because of the riches of China. And it seems that the Dutch
originally planned to try to break into that existing trade network on equal terms, like,
according to Jacob Van Neck, the captain of the first successful expedition to Indonesia,
the plan was, quote, “not to rob anyone of their property, but to trade uprightly with
all foreign nations.” But pretty soon that idea of free trade gave
way to the hard reality that competition meant, you know, lower prices, and by 1601 there
were enough successful trade companies that the cost of buying spices in Indonesia was
going up, and also there was suddenly tons of pepper in Amsterdam, which meant the price
that could be charged for that pepper was going down; clearly, something had to be done.
Ideally that something would have been lower prices for everyone, and an efficient marketplace, but
the something that happened instead was the VOC. Let’s go to the Thought Bubble. In 1601, the United Provinces, aka the Netherlands,
were governed nationally by a representative body that met at the Hague, called the States
General, although each of the individual provinces was largely self-governing, and the leader
of the States General was able to convince all the provinces to accept a single entity to
monopolize the East Indies trade. This new company, the VOC, was run by a seventeen-member
board called the Heeren XVII, and these directors supposedly had control over a company that
was chartered with the power to hire its own people, and also to wage war. I say supposedly because, you know, it took
a year for communications from the Netherlands to reach the East Indies, and another year
for company officers to respond, so the VOC basically operated as its own sovereign nation,
with the power to use as much violence as it needed to build and maintain its trading
power, like according to author Stephen Bown, “The VOC would essentially operate as a state
within a state.” And the VOC, together with its sister company
the West India Company, did use violence, attacking Portuguese and Spanish settlements
in Chile, Brazil, East and West Africa, the Persian Gulf, India, Sri Lanka, Indonesia,
China and the Philippines between 1602 and 1663, in what you could think of as an early
world war. The VOC was also different from a lot of corporations
because it was initially funded with 6.5 million guilders, about 100 million dollars in today’s
money. And that capital was expected to fund business ventures for a long time going forward
— not just for like one initial trade mission. And this long-term business thinking was unique,
especially compared to the funding strategies of the VOC’s biggest competitor, the British
East India Company, and it reflected the advanced financial acumen of the Dutch model generally. Thanks, Thought Bubble. So, we’ve got this company that’s basically
also a country. But it’s not a particularly good country, because it doesn’t have, like,
any of the responsibilities of government, nor does it have to answer to the people it’s
governing. All it has to do is make money. And it was really good at making money, like
by 1648 the United Provinces were in better financial shape than every other nation in
Europe. You can tell this partly just by looking at
interest rates. Now admittedly, interest rates are only one measure of financial health and
power, but they’re an important indicator, even today. So, Dutch businesses could borrow
at a rate of 4 percent annual interest, and that’s pretty cheap compared to the 10 percent
it cost corporations to borrow money in England or the 24.99 percent it cost me to borrow
money on my credit card. And because Dutch debt was so much cheaper, they could invest
two and a half times as much in pretty much anything than the English could, including,
like, an army and a navy, and this gave the Dutch a huge head start over their rivals. So one reason the interest rates were low
is because the companies were healthy and they tended to pay people back. But another
is that normal Dutch people were already used to investing their money in bonds that had
been issued for land reclamation projects, the famous dykes and windmills that turned
land below sea level into fields where you could grow tulips, or maybe something else,
but all they ever grow is tulips. Like according to business historian William
Bernstein, the tradition of investing in bonds, quote “carried over into trade: after 1600
Dutch citizens would consider it just as natural to own a fractional share in a trading vessel
to the Baltic or the Spice Islands.” And a fractional share is another really interesting
idea embraced by the Dutch, that allowed merchants to bear greater risks by purchasing smaller
percentage shares in business ventures. Like, it’s much better to own a tenth of ten ships
than it is to own all of one ship, because the loss of a single trading ship won’t, like, ruin you.
And Dutch business people also enthusiastically invested in futures markets, guessing what
the price of pepper would be six months or a year from now, and they created new financial
instruments that could be bought and sold, and merchants purchased maritime insurance,
which further lowered their risk. And lower risk means you could invest more of your capital
until eventually you have a completely efficient market and everything is perfect –until the 2008 crash. Wait, what were we talking about? The Dutch financial system and its corporations
were simply better than their competitors, and that’s why they seized the lion’s share
of the trading business — but that isn’t the whole story. Like, one reason the VOC was so successful
was government sponsorship and centralization. The VOC had been chartered by the States General,
and it could count on the Dutch government to back it up with money and military support. There’s another benefit to being sponsored
by your government, which is that it’s very hard for competition to emerge, because it
isn’t sponsored by your government. For instance, in Indonesia the VOC had a single governor
general managing operations, while the British East India Company was more of like a collection
of trading posts, each competing with each other for a share of the spices. Competition
may bring down prices for consumers, but it also brings down profits for businesses. In 1605, the VOC realized that if it really
wanted to maximize its profits, it would need a monopoly of the world’s spice trade, and
to do that, they would need permanent bases in Indonesia. Initially, they got spices by
trading for them with the people who grew them, especially with the inhabitants of the
Banda Islands, which was the only place where nutmeg was grown. But again, like, trading
in a fair and equitable manner is no way to maximize profits. So at first the Bandinese welcomed the Dutch,
because they were much more laid-back in terms of religion than the Portuguese, but very
quickly the Dutch tricked them into signing exclusive trade agreements, which the Bandinese
were almost certain to violate, and then when they did violate them, ehh, it didn’t go well. In 1609 the Bandinese were like, “No, you
don’t understand, like, we need trade for food,” and the Dutch were like, “But you promised!”,
and the islanders killed 47 Dutch soldiers and officers in the ensuing fight. The Dutch killed far more Bandinese, who were
eventually subdued and agreed to a nutmeg monopoly with the Dutch, although they continued
to secretly trade with the English. And after all this, by 1612, Jan Pieterszoon
Coen became the dominant force in Dutch Indonesia. He was an accountant by training, but also
a ruthless military leader, who is largely responsible for the Dutch monopoly of the
spice trade, and also for its really terrible relations with the British, and also for,
like, you know, certain crimes against humanity. Coen brought about the shift in VOC policy,
away from straightforward trade and toward monopoly of both shipping and production of
spices. He also made it clear that this trade needed to be based on military force. He wrote, “Your Honors should know by experience
that trade in Asia must be driven and maintained under the protection and favor of your Honors’
own weapons, and that the weapons must be paid for by the profits from the trade, so
that we cannot carry on trade without war, nor war without trade.” There is no trade without war, nor war without
trade — that’s something to think about. Anyway, Coen did make a lot of war, mostly
on the English, despite the fact that the Netherlands and England were engaged in trade
negotiations between 1613 and 1619. And in fact fighting between the VOC and the
English continued even after an agreement was signed. By using force, which included
capturing and torturing English traders, Coen was able to run off the English and secure
the VOC monopoly over the spice trade. With the English out of the picture, Coen
could get down to the business of using violence to dominate not only the trade, but also the
production of spices. His initial plan, to quote Stephen Bown, was to depopulate the
island to replace their inhabitants with imported slave and indentured labor under VOC control,
and he proceeded to carry out what amounted to ethnic cleansing of the Banda Islands. In about 20 years, the Dutch managed to acquire
an almost complete monopoly on cloves, nutmeg, and mace. In 1658, they added cinnamon by
taking control of Sri Lanka. And, after 1638, they became the only Europeans allowed to
trade in Japan. Now, we tend to think that the heart of the spice trade was between Indonesia
and Europe, but it really wasn’t. Like, the VOC capital at Batavia became the most important
port in all of Southeast Asia, where spices from Indonesia and gold and copper and silver
from Japan and tea and porcelain and silk from China all passed through to India, where
they were traded for cotton, which was used to buy more Asian goods. And that was the real money-maker for the
VOC. By the middle of the 17th century, only the highest-value luxury goods from the region
even made it to Europe, because that’s where the margins were the highest. So the middle of the 17th century was the
golden age for the Dutch; it was the one the brought us Rembrandt and Ver Meer as well
as all the wealth and finery that was depicted in their paintings. When you go to Amsterdam,
which you should, and you walk along the canals and see the beautiful row houses, you’ll note
that many of them were built in the 17th century. And much of that was based on the success
of the VOC and the commerce in spices, but eventually Europeans’ tastes changed, and
the desire for nutmeg was supplanted by a hunger for sugar. Of course, the sugar trade would be known
for its righteousness and fair trade — just kidding, it would be known for slavery. Also the woolens
produced by the Dutch were being replaced by the market for cotton. Britain proved better positioned
to dominate the trade in production in these new and more profitable commodities, and they
eventually copied the centralized corporate governance and finance capitalism
that had helped make the VOC so successful. According to Stephen Bown, “Ultimately, maintaining
the monopoly cost more than the spices were worth,” and the company went bankrupt in 1799. So the VOC were pioneers of finance and their
relentless pursuit of profits made them the richest company in the 17th century, but we
need to be careful about celebrating them as like a harbinger of modern capitalism.
For one thing, it wouldn’t have succeeded without government support, especially if
it had engaged just in free trade. The VOC had an army and a navy that it used to attack
and intimidate, which is, you know, not free trade. I think there’s a lot to take away from the
story of the VOC. One thing that I like to remember is that this was all about nutmeg.
We need to think carefully about what we value and why we value it and what we lose by valuing
it, in the same way that I kind of wish people in Europe had about nutmeg in the 17th century.
And the second thing is that the VOC did eventually disappear and its control over Indonesia changed
into Dutch colonization, the VOC provides a chilling example of what has happened in the past
when corporations become more powerful than states. Good governments fulfill their responsibilities
to the people they govern, and even bad governments, you know, are afraid of the people they govern,
and neither of those things happened in Indonesia when it was under the control of the Dutch
East India Company. Thanks for watching. I’ll see you next week. Hi, Crash Course is filmed here in the Chad
and Stacey Emigholz Studio in Indianapolis. It’s made with the help of all of these nice
people, and we have a special announcement today that’s very important — at least to
the future survival of Crash Course. Thousands of you have helped us to keep Crash
Course free for everyone forever through your support at Subbable, but now Subbable has
merged with Patreon. Patreon’s an awesome company run by creators. It allows you to
be much more flexible in your support of Crash Course. So if you like Crash Course and you
want to join the incredibly generous people who make it possible, please click here, or
else check out the link in the doobly doo. You can get lots of great perks and we, in
turn, promise to use that money to make educational content online and not — we promise — to
control the spice trade in Indonesia. Thanks again for watching and as we say in
my hometown, don’t forget to be awesome.

Posted by Lewis Heart

This article has 100 comments

  1. Again it is shown that without the state, there are no large corporations. And that's just what free-market advocates say. It became clear that the state is the largest creator and maintainer of monopolies.

    Reply
  2. Please, if you ever show the Hague again or any (already independent Dutch state) please don't use Spanish and Castillian flags in our government building ,like in 4:42 ….

    Reply
  3. wow, I had no idea that VOC initial capitalization was so HUGE! That means there were many many wealthy merchants willing to risk huge money to buy shares.

    Reply
  4. SO MUCH OF THIS is out of the first few chapters Merchant Kings by Stephen Bown. Like a totally direct extract. You do little to give credit to him.

    Reply
  5. As a Blackman I have just learn never mess with a white boy and his love for sugar and spice!
    They will kill for spicy sandwiches.

    Reply
  6. fun fact: thanks to the dutch influence in japan you can eat in lots of places the boumkuchen (a dutch cake) which is very famous 🙂

    Reply
  7. You mention several times that prices going down for goods or services also means profits decreasing, however, this isn't the entire case. Every good or service has a "sweet spot" between quantity sold and cost per item. Generally, the lower the cost of an item is, the more people there are that can afford to purchase it, so while price per item goes down, the quantity that you sell goes up, and because of economies of scale, the cost to manufacturer or offer a good or service also decreases. Manufacturing 4K TVs is more profitable now than it was when they were 3,000 USD each.

    With increased demand, we get economies of scale, and the cost to produce an item will typically go down.

    Reply
  8. Dutch killed millions of people in South East Asia
    Dutch: They are our ancestors! Our beloved heroes! We are so proud of our history.

    Other country police handled rioters.
    Dutch: HUMAN RIGHT ABUSE!!! HUMAN RIGHT ABUSE!!!

    Reply
  9. Best thing our grip on the colony’s Wase better then many kindoms had over their OWN pepole is that not funny?
    If we would have gone in a union with prussia or another big german state we would have been capeble of actualy settling those places and make them actual extensions of our nation because we lacked the menpower witch the other sea powers had and land-war expertise al tho we sold alot of guns 2 because profit Wase our best friend.

    Reply
  10. here for history homework which questions start off as

    What two aspects are a part of the Dutch East India Company?
    WHy did the trade in the Indian OCean fail in the 15th and 16th century?

    Reply
  11. Sorry you're too annoying to watch and by 45 seconds in were still bollocksing on about something that wasn't Capitalism and the Dutch East India Company so I gave up watching.

    Reply
  12. it's quite rare to mention that massive damage of 400 years of colonialism has left majority with inferiority complex at whole nation level. I meant it! Growing up at middle class of Indonesian, I saw our people seeing foreigner (especially caucasian) with amaze, and suddenly become second class citizen and they would look any of us with awe if we married one. As if our social class is automatically escalated by marrying white people

    Reply
  13. Northwest Iowa has a huge population of folks of Dutch descent. And out there they have a saying: "If you ain't Dutch, you ain't much."

    Reply
  14. When an ad starts for Curiosity Stream's First Man and you skip it after 6 seconds:
    "50 Million Years ago, a new species appeared on earth–"
    "Hi! I'm John Green…"

    Reply
  15. All of this haapened after King Sebastião of Portugal died in Marrocos and then the Dutch started to assault the former Portuguese outposts of India , Malacca etc

    Reply
  16. Imagine if you were part of the Dutch East India Company, why was it difficult for you to trade uprightly with foreign nations in Southeast Asia?

    Reply
  17. Thereś not much to be proud of here Dutchies.. We were the original assholes that just about started the whole 'exploit others for personal gain' business plan. A shameful history and the world is suffering for it still. And still there's streets named after these plunderers..

    Reply
  18. That’s corporatism before you continue to aggrandize that guy who never had a job, owned a business, or ran for office but somehow feels qualified to tell all of us how to do all three. A Government creates super-monopoly isn’t capitalism.

    (That sticker on your laptop and the fact that you think fascists are still a real thing kinda let’s us all know which side of the debate you’re on and where your bias ultimately is regardless of what anyone “calls” you)

    Reply
  19. For a minute I thought that Europeans could just go west to India forgetting about the continents I live on

    Reply
  20. Mughal Bengal was worth 12% of world GDP and caused the proto industrialization, so the first industrial revolution was going to occur in Bengal/India and not in Britain.

    Reply
  21. Dutch stealing and helpless their ex colony now like a trash , but Brit help their ex colony to rise together .

    Reply
  22. I’m dutch and his pronounce is horrible. Het is zeg maar meer dat je de letters duidelijker uitspreekt. En niet op ze’n Engels. Wij als land accepteren het niet dat jullie ons geweldige republiek niet geweldig vinden. Zoek een leven

    Reply
  23. The trade companies were owned by countries they were an important step towards capitalism but they weren't capitalist institutions. The reason they were as poweful as they were was because of government protection and funding.

    Reply
  24. Seeing the "this machine kills fascists" sticker in 2019 makes me long for the good ol' days of four years ago when Trump wasn't president and Neo-Nazis were afraid to be seen in public.

    Reply
  25. While I have to laugh about your pronunciation of "Verenigde Oost Indische Compagnie", I totally understand that you just can't pronounce it. The Dutch language uses some sounds that feel more like emulating a coffee machine than actually talking to someone.

    Reply
  26. The most important thing to remember about judging the past, is that as far as it has always been, with rare exception (and even stretching as far as today, oft without cognitive assessment), we as a species have always followed one clear truth about existence, that the lives of our people are paramount, the Tribal view, that they would go to any lengths to secure for their fellows a life of comfort and relative safety, no matter the expense of another.

    When you view it through the proper lens, it is simply an understanding that you will do whatever it is you can for you, and yours to survive, whereas I will do the same, and that at times, for me to succeed, you must fail, and vice versa. That there were a limited amount of resources in the world (still true today in many cases), was without factual scrutiny, and subsequently that the prosperity of one's people could be easily balanced upon a combination of factors, their ability to control the resources of production and storage for necessary and desired goods, the capacity to protect those goods from competitors, and ultimately, the near-ruthless pursuit of more.

    To subsist on 'merely enough', is, bearing repetition, never enough, and so for the sake of themselves, and those that they hold close, they would take what is needed or wanted by another, in order to give it to those that they care for, which otherwise need or desire that good. To judge survival tendencies on a basis of morality is preposterous, to be frank, had each conqueror not sought power, set forth to take on the world itself, to carve out a domain of their own, then to them they would have fallen. It is idealistic, but naive, to believe that people will set aside their own wants for another's needs, this is a fact of life. To do so is noble, yet considered so precisely because not only is it irrational to some extent, but that it apportions a cost upon the giver, and for the sake of the receiver.

    To the modern, relatively safe, healthy, and content populace, the apparent barbarism of prior centuries, of their uncouth, uneducated, greedy, and henceforth vilified ancestors are truly the most savage of monsters; yet, these idealogues of today, seem entirely ignorant of their own impact. How many a man has walked by the homeless, the starving and destitute, without so much as a consideration for their providing or well-being? Brandying such mighty words, striking down the contemporary that dared to violate the morality of today, yet blind, this is why the parables of the Bible are important for philosophical study, and that those left bereft of them, truly are without grace, that of a godly nature, and surely bereft of that true intellectuals bear. 'Let he who is without sin cast the first stone' has relevance far beyond the simpler message, and it has to do with the acts of others, or inaction equally so, bearing in mind one's own decisions and faults. To criticize, while being flawed, is not only hypocrisy, it is indicative of the belief on part of the speaker, that they are worthy to say such of another, that they are, in that term at least, without reproach.

    I like your videos, but do keep in mind that much of the audience won't ponder any deeper than the depths of your words, that subsequently your statements become irrefutably accepted, not as if thoughts to be considered, but dogma to be followed.

    Reply
  27. Arguing for or against capitalism goes wrong the moment someone says something like “the capitalist system” or “unregulated/unfettered market” since what they assume is that capitalism is a “system” with someone with a bullhorn sitting on a throne shouting about market functions when in reality capitalism is simply freedom to make decisions without violent force

    Reply
  28. Mercantilism*** capitalism was a system that came in protest to mercantilism freedom from government interference the companies weren’t declaring war and then telling the king they had directions to do such things if thought necessary from the gov.. much closer to democratic socialism since it was for the befit of the state sponsored by the state

    Reply

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